Pandora Sued by Major Labels Over Pre-1972 Copyrights

April 18 (Bloomberg) -- Pandora Media Inc., the biggest
Internet radio service, was sued by major record labels for
failing to pay for using music recorded before 1972.

The companies, including Capitol Records LLC and Sony Music
Entertainment, filed the copyright infringement lawsuit in New
York State Supreme Court in Manhattan yesterday because federal
law doesn’t protect recordings made before Feb. 15, 1972. New
York courts have enforced ownership rights stemming from before
that date, according to the suit.

The labels accused the Oakland, California-based music
streaming service of “massive and continuing unauthorized
commercial exploitation” of thousands of recordings including
iconic songs such as the Beatles’ “Hey Jude,” Bob Dylan’s
“Like a Rolling Stone” and Marvin Gaye’s “I Heard It Through
the Grapevine.”

“This case presents a classic attempt by Pandora to reap
where it has not sown,” the companies said.

Pandora has been fighting in court over how much it has to
pay to stream music. In a ruling that sets a precedent for
future rate battles, a federal judge in Manhattan last month
said the company must give 1.85 percent of revenue to a group
representing songwriters and music publishers, rejecting
Pandora’s request for a lower rate.

Profit Threat

“Pandora is confident in its legal position and looks
forward to a quick resolution of this matter,” Will Valentine,
a spokesman for the company, said by e-mail about yesterday’s
ruling.

Pandora had sued the 470,000-member American Society of
Composers, Authors and Publishers in 2012, saying that the fees
charged at the time made sustained profitability impossible.

Pandora said in a filing with the U.S. Securities and
Exchange Commission earlier this year that pre-1972 recordings
are “governed by a patchwork” of state laws and that it could
be subject to a “significant” liability if it was found to
have violated the copyrights of their owners. If it has to pay
to license the pre-1972 music, it might have to remove the
recordings from its service, the company said.

The company’s shares yesterday fell 1.2 percent to $27.02
in New York. The stock has more than doubled in the past year.

The complaint follows a similar suit filed last year
against New York-based Sirius XM Holdings Inc. in state court in
California.

Unfair Advantage

The plaintiffs, which also include Vivendi SA’s UMG
Recordings Inc., Warner Music Group Corp. and ABKCO Music &
Records, said the infringement of their copyrights is also
unfair to other businesses that compete with Pandora and pay for
the right to stream the songs. Many of the artists with pre-1972
recordings are deceased or no longer actively recording, so they
and their families rely on income from their music, according to
the suit.

Steve Cropper, a songwriter and guitarist and member of
Booker T. and the MG’s, said in a statement distributed by the
Recording Industry Association of America that Pandora’s lack of
compensation to artists for songs made before 1972 is “an
injustice that boggles the mind.”

“I don’t understand any business that refuses to pay for
the product it sells,” Cropper said. “Early rockers like me
and my peers had some great hits before 1972 -- songs that help
these digital music outlets succeed with their popular oldies
channels. Why would they not want to compensate me for my
work?”

The case is Capitol Records LLC v. Pandora Media Inc.,
651195/2014, New York State Supreme Court, New York County
(Manhattan).

To contact the reporter on this story:
Chris Dolmetsch in New York State Supreme Court in Manhattan at